U.S. growth is expected to rise into the 2.5 to 3 percent range in 2017 with President-elect Trump's efforts to trim excessive regulation and tax reform for companies and households likely enacted through a second reconciliation bill sometime around the August recess. Infrastructure spending could also provide a boost in the second half of 2017 should Congress and the incoming administration be able to quickly enact some spending package in the first 100 days. However, employers are projected to add an average 168,000 jobs per month in 2017, down from 180,000 jobs in 2016 as the economic expansion continues to mature and Baby-Boomers retire. The unemployment rate is expected to remain between 4.3 and 4.7 percent throughout the year.
Debt Ceiling, Strong Dollar and Interest Rates Pose Challenges The existing debt ceiling is set to expire on March 15, 2017, which will likely set up another meaningless fight in Congress that will be resolved with another increase in the ceiling after some posturing and brinkmanship. However, the Federal Reserve is expected to increase interest rates three times in 2017, which will create some headwind for the economy and the rising value of the dollar since the election will also act as a drag on 2017 growth. Consumer spending, driven by wage and employment gains, is expected to continue supporting the economy next year despite higher consumer interest rates.
Wage Growth Expected to Outpace Productivity Average hourly earnings increased by an average 2.9 percent in December, significantly higher than the average 2.6 percent over the previous 12 months. Wage growth in 2017 is expected to rise from December’s pace to an average increase of 3.0 percent over the course of the year, outpacing inflation and putting a strain on productivity and labor costs. With both the number and rate of job openings at near record highs, relatively tight U.S. labor markets will continue to drive up wages and benefit costs.
Talent Challenges To Deepen In U.S. With almost 10,000 members of the baby-boomer generation retiring every day in the U.S. and the labor force participation rate stuck at its lowest level since 1978, employers will be forced to select from shrinking talent pools in 2017 and beyond. According to ManpowerGroup, more employers than ever are turning to training and development to address their talent shortages. In the U.S., nearly one-half of employers are offering training and development to existing staff, and about 1 in 5 employers are paying higher salary packages to recruits and providing additional perks/benefits to recruits to address their talent shortage. Globally, talent shortages are greatest in Japan (86 percent), Taiwan (73 percent), Romania (72 percent), and Hong Kong (69 percent), and lowest in China (10 percent), Norway (16 percent), the Netherlands (17 percent), and the United Kingdom (18 percent).
